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02 February 2013

Service Tax Rule in India for Income from Online Advertisements and Affiliate Income from Blogger

Service Tax is a form of tax which is levied on any service and is to
be paid by the “provider” of the service to the Central Govt. at the
rates in force. The provider of the service can in turn collect the tax
form the recipient of his service.
Starting July 1, 2012, India has shifted to the Negative List System
which states that Service Tax would be levied on all services except
the ones mentioned in the Negative List. Earlier, all services were
exempt from Service Tax except those mentioned in the act.

The sale of advertising space or time slots is included under (G) Section 66D of Finance Act, 2012.

Service Tax on Income from Advertisements

The educational guide on Service Tax,
released by the Indian Ministry of Finance on June 20, 2012, mentions
(page 35) that Service Tax is to be levied on the sale of space or time
for advertisement to be broadcasted on radio or television. However, the
notification also states that service tax is not to be levied on sale of space in print media, bill boards, buildings, cell phones, ATM Machines & Internet.
As
the new service tax regime has specifically stated that Service Tax is
not chargeable on the sale of space for advertisements on the Internet,
website owners and bloggers are exempted from paying Service Tax in
India.
In case you have already paid Service Tax on online income
from Google AdSense and other direct ad Sales, you can always claim
refund of Service Tax.

Service Tax on Affiliate Income of Bloggers

The
service tax is only exempted for advertising income but if you who are
earning revenue though affiliate commissions (like Amazon Associates) or
by providing other related services on the Internet, service Tax would
be levied on all such services.
Moreover, service tax is levied on the Gross Amount Received rather than on the Net Income (i.e. Gross Amount – Expenses).
You
can however claim Small Scale Service Provider exemption if the gross
value of such services is less than Rs. 10 Lakhs. In other words, you
are not required to pay any tax if the gross value of services provided
by you is less than Rs. 10 Lakhs.